MPs slam DoH over Peterborough PFI hospital

7 Feb 13

MPs have criticised the Department of Health’s ‘extraordinary’ decision to approve a Private Finance Initiative hospital in Peterborough in 2007 while another hospital was in financial difficulty just 24 miles away.

By Richard Johnstone | 7 February 2013

MPs have criticised the Department of Health’s ‘extraordinary’ decision to approve a Private Finance Initiative hospital in Peterborough in 2007 while another hospital was in financial difficulty just 24 miles away.

As a result, the East of England now had two hospitals that were not financially viable and faced uncertain futures, the Public Accounts Committee said.

By 2011, Hinchingbrooke Health Care NHS Trust had accumulated debts of £39m as a result of management errors and inaccurate income projections. As a result, the hospital was taken over in November 2011 by Circle, a social enterprise, in the first franchise agreement in the NHS.

In the same year, Peterborough and Stamford Hospitals NHS Foundation Trust was struggling to afford the PFI payments on Peterborough City Hospital, which became fully operational in December 2010. By the end of 2011/12, the trust had accumulated debts of £45.8m, on a turnover of £208m. At 22%, this is the highest ratio of debt to turnover in the NHS.

Peterborough’s financial position is now so perilous that, even if it achieves challenging annual savings, it will still require additional financial support of around £26m for each of the next 30 years, the PAC concluded.

Circle Healthcare has pledged to save £311m over its ten-year Hinchingbrooke contract, but the MPs concluded neither Hinchingbrooke nor Peterborough & Stamford were financially sustainable in their current forms.

The fact the two major deals had been agreed entirely separately showed ‘a complete lack of strategic oversight’ by the strategic health authority and the Department of Health, the committee said.

Committee member Stewart Jackson, who is also the MP for Peterborough, said management of health resources across the East of England had failed. Ultimate responsibility for this rests with the DoH, he added.

‘For many years to come, the local community as well as the NHS and taxpayers will have to live with the consequences of separate decisions to build a new PFI hospital at Peterborough and to award a franchise to a private company to run the nearby Hinchingbrooke Hospital.

‘It is extraordinary that these decisions were taken separately despite the fact that the two hospitals are only 24 miles apart. None of the health bodies involved, including the department, seems to have looked at the overall impact these decisions would have on the local health economy. The reality is that there is not enough funding there for both trusts to thrive as currently configured.’

Responding to the report, health minister Lord Howe said it showed there were u’nique challenges for managing health care in the East of England’. He added: ‘We will not sweep these problems under the carpet, and in doing so our priority will be to ensure the needs of local patients continue to be met in the best possible way.

‘We are working closely with both hospitals and Monitor to ensure local patients continue to have access to high-quality services whilst managing the financial issues faced in the East of England region.’

2015 Public Finance. Public Finance is published on behalf of the Chartered Institute of Public Finance and Accountancy by Redactive Publishing Ltd. All rights reserved. Reproduction of any part is not allowed without written permission. Redactive, 17-18 Britton Street, London, EC1M 5TP